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There was disappointing news on the exports front in the new financial year as growth crashed to a four-month low of only 0.64 per cent in March, as sectors such as engineering goods and gems and jewellery suffered sharp contractions.

According to data released by the commerce and industry ministry on Wednesday, exports stood at $26.07 billion in April, managing an overall positive growth rate due to high realisations from petroleum receipts.

The sudden reversal in outbound shipments comes in stark contrast to March, when export growth had reached double digits for the first time in five months. March’s 11 per cent growth had followed four straight months of growth.

On the other hand, import growth reached a five-month high, registering 4.4 per cent growth.

This resulted in the consequent trade deficit also reaching a five-month high, worrying commerce department officials who expect deficit to go up unabated in 2019-20.

Shipments rise in March

A slack in performance of two key foreign exchange earning sectors – engineering goods and gems and jewellery – pulled down export growth in April. Of the 30 major product groups, 14 recorded a growth in April, a steep climb down from 20 in March.

After being one of the growth pullers in the previous financial year, engineering goods contracted by 7 per cent in April. The sector had shown signs of recovery in the past few months and growth had been 16.2 per cent in March. The sector accounts for nearly one-fourth of the total foreign exchange earned through exports.

For gems, contraction that had gripped the sector periodically since November, became worse in April, when exports fell by 13.38 per cent to ship out $2.85 billion worth of goods.

The latest results came as a blow to businesses as the pace of contraction had reduced over the past few months and was a much milder 0.37 per cent in March.

The pace of exports has been hit in the sector, as fund availability dried up in the aftermath of the Nirav Modi fraud.

Elsewhere, readymade garments, the sector in which India’s export competitiveness has steadily fallen over the past financial year, showed signs of steady recovery with $1.40 billion worth of merchandise exported in April. However, growth moderated to 4.42 per cent in the latest month, down from the more than 15 per cent in March.

The case was similar to drugs and pharmaceuticals exports which managed to rise but at a much slower pace. Growth was 4 per cent in April, much lower than 13.59 per cent seen in the previous month..

Receipts from the volatile processed petroleum exports, however, exploded with a more than 30 per cent growth, up from the 6.55 per cent rise in March. While global crude prices started reducing from early November and a supply glut was expected to remain till the middle of the year, prices started rising again.

Imports remain manageable

As a result, the largest component of the import bill — crude oil — saw the cost of inbound shipments rise by 9.26 per cent, up from 5.5 per cent in March.

Gold, which accounts for the second-largest cost in the import bill, saw a sharp rise of 56 per cent to $3.97 billion. Imports of the metal had continued to see an uptick in 2019 and had risen by 31.2 per cent in March. The industry continues to see volatility as imports had risen in July after remaining in negative territory for six months.

Overall, import growth hasn’t touched double-digit figures since October and the monthly trade deficit came in at $15.33 billion, up from $10.89 billion in March. Non-oil, non-gold imports, a sign of domestic industrial demand, remained depressed in April, contracting 2.19 per cent but lower than the 2.67 per cent contraction in March.

“With rising trade tension between US and China, the global trade scenario may further worsen, putting more pressure on Indian exports in the months to come. The uncertainty attached to it will affect the flow of investment and add to the currency volatility,” said Ganesh Kumar Gupta, president of the Federation of Indian Export Organisations.